Banks Warned of Need to Confirm Customer Information Changes
Combating Money Laundering and Terrorist Financing in Japan
As part of ongoing efforts to prevent money laundering and terrorist financing, financial institutions in Japan are being urged to confirm changes in customer information. This move is aimed at ensuring that deposit accounts opened by foreign visitors to Japan are not misused.
Confirming Customer Information
Banks and other financial institutions have been more proactive in recent years in verifying customer data. To achieve this, they are sending emails or letters to customers to ensure that their information remains up-to-date. This includes:
- Verifying customer data during onboarding
- Monitoring transactions for suspicious activity
- Reporting suspicious transactions to regulatory authorities
New Measures Implemented
To combat the misuse of deposit accounts, financial institutions have implemented new measures, including:
- Confirming visitors’ periods of stay in Japan
- Requesting closure of deposit accounts upon departure from the country
- Screening against databases of anti-social forces and sanctioned persons during onboarding and updates
Automated Systems for Monitoring Transactions
Retail banks are using automated systems to monitor deposit account transactions, while the Japanese Bankers Association is working to develop monitoring systems for common use across the industry.
Enforcement Measures
Regulatory authorities in Japan have implemented reporting orders and business improvement orders to ensure compliance with anti-money laundering and counter-terrorist financing requirements. Failure to comply may result in administrative penalties, including:
- Business improvement orders
- Reporting orders
Compliance Deadline
Financial institutions are required to complete the development of their governance arrangements in compliance with guidelines published by the end of March 2024.
Japan’s Anti-Money Laundering Efforts
Japan has been a member of the Financial Action Task Force (FATF) since its establishment in 1990 and has developed its legal framework for AML/CFT based on FATF recommendations. The country is also a member of the Wolfsberg Group, which publishes frameworks and guidance for managing financial crime risks.
Other laws affecting anti-money laundering efforts in Japan include:
- Act on the Protection of Personal Information
- Whistleblower Protection Act
Under these laws, obliged entities are required to obtain customer consent when providing personal data to third parties, unless an exemption applies.
Preparation for FATF Mutual Examinations
As Japan prepares for its fifth round of mutual examinations with FATF starting from 2024, financial institutions are advised to ensure that their governance arrangements are adequate and compliant with regulatory requirements to avoid administrative penalties.